How to Renovate Your SMSF Investment Property

How to Renovate Your SMSF Investment Property

So, you’ve invested in property through your SMSF and decided it needs some work. The question now is how to renovate your SMSF property? Is it as simple as calling a contractor and beginning work? Or are there certain rules attached to your SMSF investment property to consider before you pick up the phone?

 

Am I Permitted to Renovate My SMSF Property?

It depends. The legislation regarding renovations on an SMSF property dictates that should you have borrowed funds to make the purchase you will be restricted in regards to what you are allowed to do to it.

If your SMSF purchased the property outright, then how you proceed is at your discretion. As the trustee, you may renovate, sub-divide or develop the property as you see fit. 

 

What Are the Rules If I Borrowed to Buy?

 If you borrowed through your SMSF then renovating your SMSF investment property becomes a little more complicated. 

You may proceed only if:

  • The improvements are made using existing funds in the SMSF and not via additional borrowing.
  • The property is not so fundamentally changed that it represents a ‘replacement asset.’ 

 

What If My Property Needs Extensive Repairs? 

At what point do repairs become renovations? How is this determined? 

Repairs are considered anything that restores the original without changing its overall character. You may repair, replace or correct anything that has been broken or simply aged and become worn out. Damage from natural disasters or accidents is also considered repairs. While you may not borrow through your fund for renovations if the property isn’t owned outright, you are permitted to borrow for necessary repairs.  

Renovations or improvements that would breach the rules for mortgaged SMSF properties are deemed to be anything that alters the property’s purpose or function. For example, converting a residential property into a commercial one such as an office. This would count as a replacement asset, as would any changes to the title deed whereby a sub-division is carried out or strata terms created. 

 

Can I Do the Renovations Myself?

Regardless of whether you own the property or it is mortgaged through your SMSF, you are not permitted to carry out renovations yourself. 

 

Where to Seek Help

Feeling confused or overwhelmed by the rules? At Corbwood & Associates, our skilled financial advisors can support you in navigating the rules surrounding how to renovate your SMSF investment property. Our goal is to help you prepare for your retirement and make the most of your SMSF without the risk of breaching any of the relevant legislation. 

Don’t be put off investing or Buying Property with SMSF due to the complex rules involved. Let Corbwood & Associates guide you through. Contact us today on 07 5609 8874 to arrange a consultation to see how we can help secure your financial future.

Can You Buy Multiple Investment Properties With SMSF?

Can You Buy Multiple Investment Properties With SMSF?

If you’ve ventured into property investment via your SMSF and are ready to expand you may be wondering if you can buy multiple investment properties with your SMSF? The good news is that you can grow your property investment portfolio through your SMSF. 

 

Are There Limitations to How Many Properties You Can Buy Through Your SMSF?

The only real limitations are how much you have available to invest and whether or not you can gain finance approval should you need additional funding. You can buy multiple investment properties with your SMSF. 

You will also need to factor in your fund’s ability to meet the ongoing costs associated with each property to ensure that additional properties are not detrimental to your fund’s investment goals. 

 

Are the Investment Conditions the Same on Subsequent Properties?

Yes, the same rules apply to each property purchased. That is:

  • It must meet the ‘sole purpose test’ which stipulates that the investment must only benefit fund members.
  • It must not be purchased from anyone related to a fund member.
  • It may not be lived in by any of the fund members or any related parties.
  • It may not be rented out to a fund member or any related parties. 

‘Related parties’ is a broad term that covers several groups beyond just relatives and friends. Ensure you understand this regulation in full to avoid any issues with compliance. Failure to be compliant can result in fines and possible jail time. 

 

Financing Additional Investment Properties Via Your SMSF

Should you not have enough funds in your SMSF to cover the full purchase of additional properties you will need to enter into a new LRBA (limited recourse borrowing agreement) for each property you purchase. You can learn more about your borrowing options via our blog on this topic. 

Keep in mind that the same complexities will apply to each new LRBA application, and you may find it harder to get approval as your portfolio grows. To avoid this, it is recommended that you seek expert financial advice, to ensure your SMSF is managed properly and it keeps an adequate balance. 

With multiple loans and properties with ongoing expenses, you will want to ensure you have an expert handling your SMSF. This will keep you compliant and help to avoid any issues during audits. 

 

Can I Use My Super To Buy an Investment Property?

Unfortunately, no, this strategy is not permitted when expanding your SMSF property portfolio. While this is a commonplace avenue in normal property investment, the regulations and legislation set up to govern self-managed super funds stipulate that equity may not be used. 

If you prefer to use equity to grow a property investment portfolio, you will need to do this outside of your SMSF. 

 

Need Help?

At Corbwood & Associates, our specialist SMSF experts can guide you through every aspect of SMSF property investment. Contact us today on 07 5609 8874 to arrange a consultation to see how we can help secure your financial future.

Is SMSF Property Investment Worth It?

Is SMSF Property Investment Worth It?

If you’ve begun investigating SMSF investment options and you’re wondering ‘is SMSF property investment worth it?’, you’re not alone. SMSF property investment can be confusing and seem overwhelmingly complex at first but it can also reap great returns and help boost your retirement balance when done properly. 

 

Investment Options Through Your SMSF

When deciding on your SMSF investment strategy, you’ll note that there are a number of options available to you. In addition to property, you can invest your balance in:

  • Cash and term deposits
  • Shares, both Australian and International 
  • Stocks and bonds
  • Collectables, including cars, paintings, antiques, jewelry 
  • Fixed income products 
  • Physical commodities such as wheat, oil, natural gas 

 

Why Choose to Invest in Property as Part of Your SMSF Strategy 

With so many options to choose from you might be wondering why you would choose to invest in property or if SMSF property investment is worth it. Ultimately, it will come down to a few factors such as whether you have a large enough balance to invest in property. You will also need to determine whether it will help you meet the financial goals and needs of the fund members. 

Property is viewed as a long-term investment strategy and one that will require patience to see results but there are many benefits of investing in property through your SMSF. These include:

  • Growing your retirement savings faster: allows you to prepare for a more financially secure future. 
  • Providing a steady retirement income: once your SMSF property is owned in full via your fund the rental income provides you with an ongoing income.
  • Paying less capital gains tax should you sell: CGT is capped at 10% for SMSF investments or 0% if you have started a pension.
  • Creating cash flow for future investment: if your investment is positively geared the rent flowing into your super gives you an increased balance to put towards additional SMSF investments.  
  • Reduced tax on contributions: any interest accrued on an SMSF property loan (LRBA) is tax deductible. This can help to reduce your fund’s overall tax liability. 

 

Need Help? 

If you have decided that SMSF property investment is worth it but you feel a little lost in the details, Corbwood & Associates can help. Our expert financial advisors can help you create a winning investment strategy for your SMSF. We provide clear, easy to understand advice as well as offering ongoing management services and support to keep your fund on track. 

At Corbwood & Associates, we are passionate about helping our clients prepare for an enjoyable and financially secure retirement. Contact us today on 07 5609 8874 to arrange a consultation to see how we can help secure your financial future.

Common Mistakes When Buying an SMSF Property

Common Mistakes When Buying an SMSF Property

Buying property through your SMSF is quite complex, but there are many common mistakes when buying an SMSF property that can be easily avoided. The key is to ensure you understand the detailed regulations surrounding SMSF investing before diving in. For a smooth and uncomplicated SMSF investment property purchasing experience you should also engage the help of a licensed financial advisor. 

 

How Hard Can It Be?

If you have ever bought property before you might be tempted to think that SMSF property investment will be just as straightforward. However, purchasing a residential property through your self-managed super fund comes with many rules and regulations that must be strictly adhered to. 

Investing through your SMSF is heavily regulated by APRA, the ATO and ASIC. Failure to comply with these regulations can lead to heavy fines and possible jail time so it is critical to approach SMSF investing from an informed and cautious position. 

 

6 Common Mistakes When Buying an SMSF Property 

So, what are the major pitfalls to avoid?

 

Failure to seek qualified professional advice: 

A financial advisor and a mortgage broker are not the same things. When it comes to advice surrounding your SMSF you need to ensure you are speaking with an experienced and fully licensed financial advisor that understands the ins and outs of SMSFs. 

 

Poor property selection: 

Not spending ample time researching a property and whether it will offer the return on investment you want is a mistake. One of the most common mistakes made when buying an SMSF property is that buyers go with their emotions over proven numbers. Remember, you’re not buying to live in it but to earn from it, there are also professionals that are there to support you through the process of choosing your property. 

 

Inadequate lending advice: 

SMSF loans or LRBAs are vastly different from a standard mortgage loan. Ensure you only speak to someone experienced in these loans and not a standard mortgage broker when seeking a loan or you may run into difficulties. 

 

Paying too much for financial advice: 

Expertise is vital, but it shouldn’t be exorbitantly expensive and drain your SMSF of vital funds. It is normal to budget a few thousand for advice, however, if it runs into the tens of thousands, you are paying too much. 

 

Overstretching your fund to make the purchase: 

All your investments need to be in the best interests of fund members and the long-term goals of your SMSF. Overstretching is a risk as it may leave you without essential funds to pay out a member if needed or cover the ongoing costs of your investment property. 

 

Not choosing the right solicitor or conveyancer: 

Just as with lending or SMSF advice, you should only engage legal representation that understands SMSF regulations in depth. Failure to do so could lead to delays and breaches of compliance.

 

Where to Seek Help 

 

If you are ready to invest through your SMSF but want to avoid these common mistakes when buying an SMSF property, you need Corbwood & Associates. Our fully qualified, experienced and licensed financial advisors can walk you through all aspects of SMSFs and winning investment strategies, making your experience as stress-free and streamlined as possible.  

Contact us today on 07 5609 8874 to arrange a consultation to see how we can help secure your financial future.

The Do’s and Don’ts Of Investing In Property Through A Self Managed Super Fund (SMSF)

The Do’s and Don’ts Of Investing In Property Through A Self Managed Super Fund (SMSF)

If you’re considering investing through your self-managed super fund, you’re probably wondering about the do’s and don’ts of SMSF property investment. While investing through your super can yield a whole host of great benefits, you do need to proceed with caution as it is heavily regulated and consistently audited. 

Things You Should Do

If you have a sufficient balance and meet all of the other requirements, you will get to the point in the process where you need to decide on what type of property and where you wish to buy. During the process of choosing there are many things you need to factor in. Before and after signing on the dotted line you should:

  • Create a detailed investment strategy with your advisors that outlines risks, potential returns, cash flow liquidity in relation to the property and ensure this is available to all fund members.
  • Research the areas you wish to invest in and seek professional advice through the Corbwood & associates network regarding the growth and future potential for properties you are interested in. 
  • Comply with all superannuation and taxation laws, ensuring you keep updated SMSF records and update the ATO of any changes as needed. 
  • Understand the specifics and possible challenges related to SMSF loans if additional funds are required. 

Things to Avoid

Conversely, things you should not do when investing with your Self Managed Super Fund (SMSF) include:

  • Buy a property you intend to live in or intend to let family/friends live in.
  • Buy property from friends, family, fund members or their associates.
  • Sell an SMSF property to an associated party at lower than market value.
  • Attempt to invest without qualified financial advice. You can quickly find yourself overwhelmed by the details, or in breach of the legislation.  

The reason to avoid all of these is that they contravene the guidelines set out by the ATO, ASIC and APRA concerning SMSF investing. Should you be audited and are found to be in breach of these guidelines, you may face hefty fines and even jail time. 

Corbwood & Associates Can Help You With SMSF Property Investing

At Corbwood & Associates we can assist you and introduce you to the appropriate professionals that can advise you in the specialised areas. SMSF investing is complex and incredibly detailed, so it is important to have an expert in your corner. 

Our advisors are passionate about helping you navigate SMSF investing and helping you to create a secure financial future. We can support you to do this with minimal stress and in full compliance with all relevant regulations so that your fund can continue to grow and create the retirement you dream of. 

For detailed advice surrounding all the do’s and don’ts of SMSF property investment, contact Corbwood & Associates today on 07 5609 8874.

How Much Super Do I Need to Invest in Property?

How Much Super Do I Need to Invest in Property?

For the majority of us, buying property as an investment is something we would love to include as part of our retirement strategy. With property prices rapidly increasing all over Australia this can seem unachievable as deposits are higher than ever. Thankfully, there are avenues through which you can use your super balance to invest. If this has you wondering ‘how much super do I need to buy an investment property?’, then read on. 

Can All Super Funds Invest in Property?

In short, no. Only approved self-managed super funds (SMSFs) can use their balance towards property investment. Should you have your super in an industry or retail fund you will not be permitted to access your balance until you reach pension age, though there are some exceptions to this, such as due to terminal illness or other extenuating circumstances. 

The good news is, setting up an SMSF is possible for the majority of people that qualify. In order to qualify, you must meet the minimum requirements set by the government. On average a balance of $200,000 may be a sufficient amount to give you the opportunity to purchase property through your SMSF, however, that is only one of the many requirements that are considered before you can qualify to set up a Self Managed Super Fund and is based on individual circumstances. When it comes to determining a minimum balance to buy an investment property there are a lot of things considered and this may vary based on which professionals you engage with to support you through the process. 

Setting up an SMSF has many benefits beyond just choosing your investments, but should still be considered carefully to ensure it is the right option for your needs. A consultation with a financial advisor in the Corbwood & Associates network can help you make this decision and create your SMSF. 

How Much Super Do I Need to Buy An Investment Property?

The general consensus is that you should aim to have a balance in the vicinity of $200,000. This amount is considered optimal as it not only covers a deposit but should also cover associated fees and ongoing operational costs related to the fund and the property itself. But as mentioned before this may vary depending on individual circumstances and the professionals to decide to engage with. 

Keep in mind that you are not permitted to use your entire super balance to invest, you must keep a liquidity buffer as per the conditions set out by the ATO, APRA and ASIC. Should you need additional funding to purchase the property, a higher super balance may also help you secure a more competitive loan.

Turn To Corbwood & Associates For Advice On Investing With Your SMSF

At Corbwood & Associates our team of professionals and trusted associates understand SMSF investing in depth. Our financial advisors will be able to assess individual circumstances to give you an idea of how much super you need to buy an investment property in a high-growth area. We are passionate about helping our clients create an abundant financial future through SMSF investing. Whether it is your first investment or an addition to an existing portfolio, our network of expert financial advisors can ensure you remain compliant and invest wisely. 

In order to assess your individual circumstances, Corbwood & Associates can introduce you to our trusted financial advisors to best understand your personal financial position and best advice you going forward, and what your options may be if you qualify. 

Stop wondering ‘how much super do I need to buy an investment property?’. Contact the SMSF investment experts at Corbwood & Associates today on 07 5609 8874.